Why the Ethereum Layer-2 Taiko network is spending $100,000 a day on blobs

A Ethereum layer-2 The network called Taiko dominates the market for what we call blobsor dedicated data storage for Ethereum scalers, but these efforts result in costs of tens of thousands of dollars every day for the little-known scaling solution, even surpassing the $100,000 mark several times this week.

The Taiko protocol, which went live in late May, aims to offer users cheaper and faster transactions than on Ethereum’s mainnet, while borrowing security elements from the network. Since going online, Taiko has spent a whopping $900,000 in blobs in less than two weeks to funnel user transactions into the Ethereum network.

Meanwhile, Taiko’s competitors, like Optimism network, rarely spend more than $1,000 per day on Blob-related fees. Introduced in March under the name part of an Ethereum upgradeblobs were introduced as a new resource for layer 2 scaling networks to publish Ethereum transactions at a lower cost.

Taiko Labs, creator of the protocol announcement in March, it had raised $15 million in a Series A funding round. By leveraging “zero-knowledge” cryptography in its design, Taiko is working to differentiate its scalable design in a growing field. more competitive that includes dozens of different scalable networks.

“Taiko just launched its mainnet, and there is a lot to discover before it becomes stable,” said Daniel Wang, CEO of Taiko Labs. Decrypt in a written statement. “We knew we would use more blobs than other Layer 2s. This is a design decision, not a bug.

Layer 2 networks often work by aggregating batches of transactions and processing them on a separate chain before sending the receipts back to Ethereum. However, Taiko’s design differs from this formula, in which many transactions are grouped into batches elsewhere.

Instead, the process of ordering transactions, called sequencing, takes place on Ethereum itself. In a blog postTaiko Labs said this process, called “core sequencing,” is more decentralized than other Layer 2s that rely on centralized sequencers, which are controlled by a network’s development team and collect a small part of user fees.

“It seems expensive,” Alexei Zamyatin, co-founder of Bitcoin BOB layer 2 network, known as Decrypt in an interview. “This makes it more secure, but not as secure as [Ethereum]and you are also much more expensive than most layer 2s.”

A game of compromises

Still, Wang said the costs associated with Taiko’s features could easily break even if “Taiko is fully utilized by users,” providing a sustainable amount of gas fees.

Wang added that Taiko is fully aware of the pros and cons associated with its sequencing method, and he hopes that Ethereum researchers will study Taiko’s on-chain data to explore improvements that could allow Ethereum to better support similar scaling networks.

Some Ethereum researchers, including Justin Drake, believe that Taiko’s team is at the forefront of a new form of decentralized sequencing that could solve major obstacles in the Ethereum ecosystem.

“This takes a step forward in decentralization, credible neutrality and composability of rollups,” he said. Decrypt in a written statement.

If more Layer 2 networks moved the sequencing of their transactions to Ethereum itself, then the fragmentation issues holding up all the space could be resolved, he said. Currently, liquidity and assets are widely distributed across different Layer 2s, effectively siloing users and applications within a given scaling solution while all being tied to Ethereum.

When it comes to Layer 2 networks on Ethereum, the introduction of blobs represented a significant change in how these protocols interact with the underlying blockchain. Before blobs were available as a separate paid marketplace, Layer 2s could only publish bulk transactions as Ethereum “call data,” a space for data to be contained within transactions.

Instead of mass-processing user transactions alongside regular Ethereum activity, blobs almost serve as a dedicated lane on a highway, where less congestion can reduce costs. However, the best way to package these transactions before shipping is still up for debate.

Blobs blobs blobs

In some cases, centralized sequencers can be used to paralyze a network, piercing the veil of permissionless activity that is synonymous with crypto. Sometimes centralized sequencers can be abused to delay transactions Also. However, Taiko’s commitment to decentralization may not be the most effective, according to one of its community advocates.

“Unfortunately, it’s a bit expensive,” pseudonymous cryptography researcher arixon.eth. said on Twitter (aka X). “Due to sequencing, we need to release a blob every 12 days. [seconds]and if there isn’t enough [transactions]then we just won’t fill the blobs.

Taiko Labs’ Wang said changing this pace could be a potential solution adopted soon, stating that the Taiko community is “considering reducing the block proposal frequency a bit.”

The constant flow of blobs, no matter how full they are, has made Taiko one of the top users. On Sunday, for example, Taiko released 25% of all blobs on Ethereum, according to a popular poll. Dune Dashboard. That day, Taiko spent nearly $63,000 in blob-related fees.

On Thursday, Taiko paid $123,000 in fees for blobs, representing 73% of all costs paid for Layer 2s, which was its second day in a row with a six-figure fee total. And while most Layer 2s pass on the cost savings to their users through lower fees, the premium Taiko pays for decentralization, for now, is not a bill users must foot.

“For the moment, it is partially subsidized by the team”, arixon.eth saidadding that the process could be changed in the future so that “blocks are missed until there are enough blocks.” [transactions] in the mempool for a proposer to push a block to [Ethereum] profitably.”

On Wednesday, during the first airdrop of TAIKO tokens, the network’s native cryptocurrency, Layer 2 averaged about 6.42 transactions per second, according to L2BEAT. Meanwhile, Ethereum recorded around 13.6 transactions per second itself.

The performance of Taiko’s token has been rocky so far. After crashing 40% an hour after its launch, from $3.80 to $2.27, the token’s price recovered to $2.45, at the time of writing, showing a drop of almost 3% over the last day, according to CoinGecko.

Edited by Andrew Hayward

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